Viewing the present European crisis from Australia (now briefly the lucky country thanks to China) enables a perspective devoid of the highly charged emotional response that the European press seems to have of the present crisis. We are all ruined etc.

The financial situation in the euro zone seems to be the exact opposite of that in China. Ageing population, high wages, high consumption, high government debt and rigid structures with protected powerful groups are the exact opposite to what is happening in China. In China there is low wages, low consumption, high savings, the government is buying other nation's debt and there is increasing numbers of workers entering the work force with little legal protection.

The present crisis seems to be the result of tensions that have been allowed to fester for too long. There will always be tensions and crises as long as the underlying causes and are not addressed. The wages of many European workers have to be reduced especially as compared to the rest of the world, overly generous pension entitlements especially in view of the ageing population need to show some relationship to Europe's changed position. Financial laws that continue to protect the financial sector to the detriment of everyone else need to be changed. The financial sector should be the servant of the productive sectors of the economy not be a protected group that through their power can create crises but not go bankrupt like every other enterprise can.

Where a crisis suddenly appears for no particular reason it may be a manipulated crisis. The financial problems of the PIGS had been known for a long time. Even Germany has transgressed on its obligations at one time. Everyone knew Greeks accounts were unbelievable and with the previous government of Italy everything was a joke.

Why do we have a crisis now and who is behind talking up this crisis and bringing it to a head. If the present crisis is just about tinkering around the edges then an opportunity will have been lost.

Change is coming to Europe but new financial rules will not change the fundamental issues that caused this crisis in Euroland.

Hi,
"All the world's a stage" As You Like It or not. The European key players : “at the moment ?” are Chancellor Fr. Merkel and President of France Mr. Sarkozy both “dancing at every wedding”. However their substance at home may be in question and as the result of the forthcoming elections in both lands could be voted out. Mr. Saskozy accused as a Vichy Government and Fr. Merkel the “super woman” forced to run on “Bio-sprit”. Both the opposition parties in France and Germany are reforming in Germany they have to many candidates and France the candidates are improving on profile. This questions the important decisions being made by the MarKosy axis out side there lands democratic structure. In politics the legacy of a mess is a never-ending story but the MarKosy legacy will be long standing.
Regards Terence Hale

The leader writer makes a good point: where would the 'reward' have been for Britain? The 'Merkozy' do not seem to understand that diversity in regulation in the financial & corporate sectors is vital to the whole EU. Otherwise, a point will soon be reached when many will take their business away from Europe for good.

"Otherwise, a point will soon be reached when many will take their business away from Europe for good."

I do not wish to aggrieve you and your ideas in the least but can you not see that this is precisely what the greatest part of Europe (and majust wishes to happen?

This "business" in cahoots with unbridled US financial shenanigans has just visited Europe (and maybe the world) with the greatest financial calamity since two generations. If this is the contribution you seem to cherish its departure would cause no pain outside of your casinos. Continents cut off, indeed.

"Otherwise, a point will soon be reached when many will take their business away from Europe for good."

I do not wish to aggrieve you and your ideas in the least but can you not see that this is precisely what the greatest part of Europe (and maybe the world) just wishes to happen?

This "business" in cahoots with unbridled US financial shenanigans has just visited Europe with the greatest financial calamity since two generations. If this is the contribution you seem to cherish its departure would cause no pain outside of your casinos. Continents cut off, indeed.

In the picture Sarkozy and Merkel are getting pretty intimate. It looks like viva de la Francias, is going to make zee sweet and pas- ion-nate love to ze Frau of ze faterlund. WUh huh. France and Germany unite. That is an image in my head that I didn't need to see. You'd think that Sarkozy would have better taste than that. He has a gorgeous super model wife for crying out loud, but it does leave one to wonder, did Burlesconi get the sloppy seconds during various other EU rendezvous when he was in office? This picture leads me to assume that despite his supermodel wife Sarkozy must be one of those fellows like Herman Cain with insatiable appetites even those that go as far as Angela Merkel.

Their plastic smiles are getting harder to maintain, by the agonising minute. There's nothing anyone can do, to prevent the inevitable, excrutiating & catastrophic implosion from occuring. Europe is done for..

If the European project fails, which seems likely from where I sit, then the demise of "the global economy" is not far behind. China's boom depends on Europe's endemic profligacy. Living beyond your means. As long as "other people" can be persuaded to work long hours for a pittance to produce our toys.
Has slavery really been abolished? How many here know of people who hold down three jobs to put their kids through college? How many here know what "wage slavery" really means?
What is a "housing bubble" (in China as anywhere else), if it is not due to the exploitation of wage slaves by greedy landlords?
How can "we" (as a species) continue to expect that our western consumer lifestyle should continue to ride on the exploitation of "cheap" labour elsewhere, preferably out of sight. Does anyone here know, or even care, where and under what miserable circumstances their current mobile phone was made?
"Democracy" is a farce if we do not first insist that whatever we buy must be produced by people who earn a living wage. A living wage is the ability to pay the rent, electricity and sanitation, put food on the table and your children through college. If that makes our computers and flat screen TVs too expensive, then so be it. Welcome to the real world. That's what "living within your means" really means.
Don't close the factories in China. Just insist that the workers there get a living wage. "But that will slow demand!" Sure. Would you rather never-ending growth, by the sweat of galley slaves far away?

"Today’s crisis is less about fiscal profligacy than about investors’ fears for the euro’s sustainability and their flight from peripheral assets."
Bit disingenuous this, no? Isn't this much like saying, as others have pointed out here, 'it isn't that your house is on fire, but that your guests are trying to leave, without even saying goodbye'.
Here's another analogy. Your marriage is going pear-shaped (again), and all your relatives, friends and neighbours have piled into the house to give their best advice. (Very like the comments here.)
When will "we" (as a species) realise that "democracy" is to blame? This crazy idea that "the people know best" inevitably gets you hopelessly ill-prepared, "democratically elected" politicians to serve as expert pilots, who really don't have a clue about "flying this thing".
"Con-sens-us" starts with a con. It fails to make complete sense in the middle and it places us last.
Anyone with any historical sense surely knows that dictatorship is the only thing that works in any group larger than a single family. Who can claim that every decision made at home is democratically arrived at?

Limiting budget deficits is necessary but is not sufficient to overcome the Eurozoene crisis.
More important is to limit current account deficts (and surpluses) within the Eurozone, and to step up the prudence of prudential bank regulation.

In a context of twin deficits (internal and external) the dramatization of budget deficits serves to shift attention away from the real cause of the crisis, the widening Current Account imbalances.
The Eurozone has probably reached the limits of divergence, as can be seen by the CAB current account and TARGET imbalances.

The author's recipy is "more of the same". Suppose we have Eurobonds and a state runs huge deficits. So then we deny access to this state to borrowing through Eurobonds, and thus push it further down?
There is no lack of a punishing mechanism: the markets do the disciplining and thepunishing for you.
The real challenge is to combine the basic laws of economic behaviour (e.g that lenders like to be repaid) with the social benefit-oriented mindset that pervades Europe and with its demographic realities. There is no way out. The question is just: who will be hurt? Borrowing states and their citizens + bondholders of such states? Seems most reasonable. Or should it be innocent taxpayers from solvent countries? Innocent bystanders who happen to earn Euro-denominated assets (through inflation)?

This crisis is the result of avoiding of all economic paid: even the slightest recession was avoided by monetary and fiscal stimulation, thus blowing the bubbles ever bigger. Now we need to take the pain, take the hit, see our GDP fall with 10%-20%. We need to invite educated immigrants (instead of flotsam from the poorest, most illiterate sections of the worlds population as the social democrats prefer to do to in order to import voters), get more offspring.

This really seems like a nothing policy: it seems like a very mildly toughened version of the old non-enforced financial stability pact.

My real theory about what is going on, is that Merkel doesn't want to do anything - she just wants time to pass, and either, countries will default (and probably leave the Euro) or they will balance their budgets and largely regain the market's conference by themselves (i.e. without requiring any more German funds). But of course, she can't say this - so we are stuck with seemingly endless EU meetings - where Merkel proposes some policy - that can't be implemented - just yet (i.e. EU treaty or agreement changes) - and so everything just goes on as before - which, as I've said - is just what she wants.

I really enjoyed the contributions of tp1024, bampbs, baldy 63 and concur with your thoughts.

I have long argued that any country in the EU that goes bankrupt MUST be thrown out. Thus Greece should have been thrown out a long time ago and given back their Drachmas. They can then print their own money, and thus devalue.

There have been concerns about throwing out a country in that it would cause a run on the banks. Fair enough, but there is lots of evidence that a lot of the money in Greece has already moved out anyway. And there is nothing really to prohibit the Greek government to stop runs on banks by (eg) prohibiting large withdrawals and transfers.

I know that someone will say this is illegal; you can’t stop organisations and people moving their money around! Yes, I know, but these are desperate times so break/change the rule and do it so there are still Euros that can be converted to Drachmas.

European Union has 27 provinces and 27 provincial governments, and no federal Government elected by and representative of the whole European population. EU has 11 currencies: the euro for 17 members, and the 10 others have each its own currency. The European central bank cannot adequately fight inflation nor deflation. There is no european minister of finance (they are 27) and no central fiscal power to tax the whole european population and spend (not lend) where economically necessary. All national armies must be put in an European Army under unique responsibility of the european minister of Defense, financed by the Federal Government, and every EU member (France, Germany, and the 25 others) must cease their own military spendings. The European Union minister of Foreign Affairs must be the only one to intervene in international Affairs and have EU embassies, and every EU member will reduce to nothing its spendings in Foreign Affairs and close all national embassies. The federal Government will take responsibility of all Defense and Foreign Affairs debts. The ECB European Central Bank will buy Euro-bonds from the European minister of Finance only. Those are some means to give investors confidence in the European Union and the euro. An helping Greece and Ireland to reintroduce their own national currency in an orderly manner will protect all AAA and other rates on particular bonds.

You know, you are making some good, albeit obvious, points here about the lack of real unity of purpose and a real mechanism that would enable enforcement of any kind of resolutions made by the EU. The EU is more sterile than the UN, because at least the UN has the military power of the US behind it in order to enforce resolutions. But there are other considerations, even if the EU did have "Federal" powers, and the ability by fiat to enforce resolutions derived from a majority of European states, then what? There are even more underlying problems of culture and income disparity among the EU various members, as well as the language differences that exist. People think using language. Thoughts are usually brought about via self talk. When people think in different languages they naturally think differently, and as a result they act differently and have different values. These are a lot of problems that can't be overcome. Like you said there are 27 member countries and probably more languages or language groups than that in the EU. These are difficulties. In order to function they would need to have a common language in order to have a common understanding also. Basically these people have a lot of problems and your proposal doesn't address these cultural considerations.

I broadly agree with what you are saying although I would put it in a slightly different way:

The "Euro Crisis" has its roots, quite apart from lacking a proper framework for any currency, in one simple fact that there is no Pan European Demos. The largest unit to this day within the EU that has a Demos is at the level of the nation state and flags, music and high ideals will not change this.

At a national level, one can understand the German taxpayer not wanting to fund "feckless Greeks" (quite apart from the legal constraints) but if Germany actually wants the Euro to survive, it is total nonsense.

In the UK we have a single currency and the South East of England around London produces a disproportionate amount of our GDP. If Boris Johnson (Mayor of London), took the attitude that "We will not share our wealth with those feckless Northerners, most of whom are on State Benefits..." The UK would fall apart.

My point is that whilst the Euro should have been strangled at birth, now it exists and if the Eurozone countries want to retain it then both they and especially Germany need to totally rethink their approach to internal fiscal transfers, you just can't be "a little bit pregnant", you are or your aren't.

As things are currently pointed, we are still going to Hell in a handcart, the Euro will collapse but after a painful 18 months, all of us Europeans will recover and come back stronger without this monkey on our backs.

European Union has 27 provinces and 27 provincial governments, and no federal Government elected by and representative of the whole European population. EU has 11 currencies: the euro for 17 members, and the 10 others have each its own currency. The European central bank cannot adequately fight inflation nor deflation. There is no european minister of finance (they are 27) and no central fiscal power to tax the whole european population and spend (not lend) where economically necessary. All national armies must be put in an European Army under unique responsibility of the european minister of Defense, financed by the Federal Government, and every EU member (France, Germany, and the 25 others) must cease their own military spendings. The European Union minister of Foreign Affairs must be the only one to intervene in international Affairs and have EU embassies, and every EU member will reduce to nothing its spendings in Foreign Affairs and close all national embassies. The federal Government will take responsibility of all Defense and Foreign Affairs debts. The ECB European Central Bank will buy Euro-bonds from the European minister of Finance only. Those are some means to give investors confidence in the European Union and the euro. An helping Greece and Ireland to reintroduce their own national currency in an orderly manner will protect all AAA and other rates on particular bonds.

One of the issues with a penalty of any kind for a country that does not comply to certain rules is that applying the penalty will make the problem of that country worse and thus create an almost impossible dilemma. Also there is a nasty timeconstant issue: big problems often appear much later than their causes.

And vice versa: what if money & financial rules in Europe are quite tight and it cannot participate in the next financial money bonanza.

Personally, I'm all "Euro Crisis" exhausted and think that both Merkel and Sarkozy are totally bonkers. They talk about the design of a 'grand new ship of state' whilst the one that they are on is rapidly sinking beneath them.

Either they are totally out of their minds or, behind the smoke and mirrors, the Eurozone is being prepared for what they should have done over 6 months ago, a split with Germany, Finland and NL leaving the Eurozone to form a new totally integrated D-Mark zone leaving France to lead a rapidly devaluing Eurozone.

It is quite evident that since no t many of the Eurozones members have respected the rules with regard to debt to debt to GDP and with regard to the 3% rule on budgets, a kind of fiscal union has to be established.

The problem does not centre on creating more "rules" to be broken, it is to surely create a system that works. The Euro should never have been set up as it was in the first place, it was not just flawed from outset, it was totally foolish in the first place.

But even if you decide to "retro-fit" what should have been there in the beginning, now new problems have arisen so that what were always "disparate" economies have actually pulled even further apart so that there is a productivity gulf that is unbridgeable.

The only practical solution would be for Germany, NL and Finland to leave the Eurozone and form a new D-Mark zone, in simple terms Southern Europe cannot live with Germany in the same currency zone and neither can Germany live with them. Facing that reality should have happened 6 months ago because if nothing else, the imposed austerity packages imposed on Southern Europe will not hold long enough politically to produce the economic results Germany desires.

True, Merkel is caught between both legal and political constraints at home but the refusal to countenance transfers from the wealthier to the poorer countries within the current Eurozone is a nonsense if you want a workable universal currency.

They can sign as many bits of paper as they like but unless they get realistic, the Euro will collapse sooner rather than later and this has nothing to do with British scepticism or "Anglo-Saxon" money traders, it is to do with the incompetence of EU politicians who have been fiddling whilst Rome burns.

“French President Nicolas Sarkozy has warned that "never has the risk of disintegration been greater" for Europe.”

Blah, blah blah – “We must adopt the French model for Europe or it is the end. Only we French know how to bullshit our way out of a crisis.”

Blah, blah, blah.

And while we are at it, let’s steamroll those who have competitive economies into accepting our social model and tax models. – but not allow their economies to receive the sort of subsidy our farmers do.

Blah, blah blah.

It’s like the customer who doesn’t think a suit fits, so the salesman goes into the back, brings the same suit out and says “Voila!”

Sarkosy is deperately trying to entrench France's position, ignoring the democratic wishes of other countries.

what competitive economies?! The British one? ahahah! Oh yes, keep throwing hand-outs to your "competitive" financial services to save them from bankruptcy! And increase your fiscal deficit and total debt, which is now beyond 400% and much higher than that of Italy, Greece and other "junk" countries.

Sometimes I think British people still leave in the 19th century. oh yes, and the Italians had the Roman Empire...

He's talking to the French citizens, don't you understand that he's trying to get re-elected in 5 months? He wants the French to believe that he's the saviour of Europe and that only him can lead France through this crisis.

Merkel and Sarkozy will toil to save the euro to fulfil Monnet’s vision. However, they will labour in vain to save the EU. The EU is doomed. Why? Because, European leaders have ignored the crucial advice Schuman and Adenauer offered them concerning the survival of the European Project. Had Cameron done his homework on EU, he would have discovered that a brilliant British lawyer wrote about European integration - how it would develop, its character and future prospects - even before Schuman and Monnet - the French founding fathers of EU - were born. This lawyer warned Britain would become a province of Europe and would not be saved if she joined a confederation of European nations which would develop though a great European crisis. Everything he wrote about EU has come to pass. The Lisbon Treaty has paved the way for his word on Europe’s future to be fulfilled. Britain voted in 1975 to remain in a Common Market and not to become a member of a political project. Surely, we deserve a say on who governs Britain. Why is Cameron afraid of a referendum? Britain is not his property.